Three ratios calculated for Puckerman, Cohen, and Chang companies for 2018 and 2019 follow. Required: Explain which
Question:
Required:
Explain which company appears to be the most liquid?
(in millions) Current ratio Puckerman Cohen Chang 1.8 to 1 2.2 to 1 8.0 times 9.6 times 0.5 to 1 1.2 to 1 12/31/19 2.8 to 1 2.0 to 1 6.9 times 7.6 times 2.5 to 1 1.0 to 1 2.3 to 1 1.5 to 1 5.8 times 5.8 times 2.1 to 1 1.4 to 1 Inventory turnover ratio 12/31/19 12/31/18 12/31/19 12/31/18 Quick ratio
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For 2019 Puckerman Company appears to be the most liquid c...View the full answer
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Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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